CINCINNATI - Fifth Third Bancorp (Nasdaq: FITB) and financial holding company Old Kent (NYSE: OK) announced the signing of an agreement to merge next year. The combined company will have $69.1 billion in assets, $43.8 billion in deposits and over 980 banking locations, primarily in Ohio, Kentucky, Indiana, Michigan and Illinois.
According to Fifth Third, the deal will make the company the second largest banking franchise, based on deposits, in the Midwestern states where both partners do business. Fifth Third will exchange, on a tax-free basis, 0.74 shares of its common stock for each share of Old Kent common stock. Based on Fifth Third's November 17, 2000, closing price of $48.06, the transaction is valued at approximately $4.9 billion.
The merger is expected to be approximately 11 percent accretive to Fifth Third's 2001 earnings per share. In addition, the transaction will significantly exceed Fifth Third's internal rate of return goals. Management of the combined company expects to achieve cost savings of 20 percent of Old Kent's total operating expenses, with these savings being phased in 25 percent in 2001, 75 percent in 2002 and 100 percent by 2003. Fifth Third expects to incur merger-related charges of approximately $235 million after tax. The transaction is scheduled for completion in the second quarter of 2001 and accounted for as a pooling of interests.
Following the merger, Fifth Third will establish Fifth Third Bank Michigan with three main banks in Grand Rapids, Detroit and Traverse City. David J. Wagner will serve as chairman and CEO of Fifth Third Bank Michigan and remain in Grand Rapids. He will become one of three new directors added to Fifth Third Bancorp's board of directors as a result of the merger.
Kevin T. Kabat of Old Kent will be president of Fifth Third Bank in Grand Rapids. Bradlee F. Stamper, currently Fifth Third president and CEO in Northern Indiana, will lead Fifth Third Bank Chicago; and Robert H. Warrington will serve as president of the Fifth Third Mortgage Company.
Completion of the merger is subject to normal regulatory approvals and approval of Fifth Third and Old Kent shareholders. Old Kent has granted Fifth Third an option to purchase 19.9 percent of its common shares under certain circumstances.
